Felix Meritis - Europees centrum voor kunst, cultuur en wetenschap

jan spek - h.speckens@ziggo.nl

The banks blew up the system and now the country has slipped into a depression. Currently, the banks are lobbying congress to preserve the "financial innovations" which are at the heart of the crisis. These so-called innovations are, in fact, the instruments (derivatives) and processes (securitization) which help the banks achieve their main goal of avoiding reserve requirements. Securitization and derivatives are devices for concealing the build-up of leverage which is essential for increasing profits with as little capital as possible. If Congress fails to see through this ruse and re-regulate the system, the banks will inflate another bubble and destroy what little is left of the ailing economy. On June 22, 2009, Christopher Whalen, of Institutional Risk Analysis, appeared before the Senate Committee on Banking, Housing and Urban Affairs, and outlined the dangers of Over-The-Counter (OTC) derivatives. He pointed out that derivatives trading is hugely profitable and generates "supra-normal returns" for banking giants JP Morgan, Goldman Sachs and other large derivatives dealers. He also noted that, "the deliberate inefficiency of the OTC derivatives market results in a dedicated tax or subsidy meant to benefit one class of financial institutions, namely the largest OTC dealer banks, at the expense of other market participants."